The foreign exchange (Forex, in short) market is the largest financial market in the world. According to the Bank for International Settlements (BIS), it dwarfs every other financial market, with a daily volume of almost $6.6 trillion. To put that into perspective, the combined daily volume of the stock markets in the world is around $353 billion. That makes the global Forex market almost 20 times more active than the global stock market. But what about Forex trade in South Africa?
With around 170 different currencies in the world today, it is no surprise that such an active and large market attracts both professional and retail traders. Even in retail trading, the high liquidity and competition in the Forex market result in extremely tight spreads, which is very beneficial for the profitability of retail traders. To put a number on just how popular Forex trading is, most recent estimates show there are almost 10 million Forex traders in the world. There are 1.3 million in Africa, and around 190,000 are in South Africa.
Forex Trading in South Africa
The foreign exchange market does not have a central exchange. Instead, transactions take place in many different forms through various channels worldwide. It is a 24/5 market which means it is open every hour of the day throughout the five working days of the week and is closed at the weekend and on Bank Holidays.
In this article, we will take a look at the best time to trade Forex in South Africa. We will dive deeper into the four main trading sessions and see which of them are the most active. We are going to answer the question, “what time does the Forex market open in South Africa,” and we will take a look at the South African economy and the factors affecting its national currency.
The South African Economy
After the pandemic-induced contraction of 6.4% in 2020, the South African economy has staged a strong rebound, with GDP rising by 4.9% in 2021. The recovery was primarily driven by strong commodity prices and the gradual reopening of the economy after the mobility and other COVID-19 restrictions. That said, the country’s total GDP output is below its 2017 Q3 level and is expected to remain below 2% in 2023 and 2024.
South Africa’s GDP per capita has enjoyed stable growth since 2000, up until just after the Great Recession of 2008. Since then, the country’s GDP per capita has stagnated and remains on par with those before the Great Recession. That is because the country’s economic growth did not keep up with the growth of its population. Additionally, South Africa suffers from one of the worst employment situations in the world, with its 2021 Q3 unemployment rising to almost 35% and the expanded definition – which includes discouraged workers who are no longer seeking job opportunities – reaching 46.6%. The unemployment rate is highest among young people aged between 15 and 24, where almost two-thirds of the segment remain jobless. Therefore, it is no surprise that an increasing number of people are turning to alternative ways to earn a living with a low barrier to entry, one of them being Forex trading.
South Africa’s Economic Challenges
Inequality in the country is rampant – South Africa has one of the highest inequality rates in the world, with a Gini Coefficient of 0.67 in 2018. A Gini Coefficient measures how income is distributed among the population. It ranges between 0 and 1, with 0 meaning perfect equality and 1 meaning perfect inequality. Wealth inequality, however, is even worse, and inequalities are passed down from generation to generation with little change over time.
All the economic struggles mentioned above, higher interest rates, rising inflation, high debt levels, and limited fiscal response, against a backdrop of an unstable global growth environment (attributed mainly to persisting supply bottlenecks, economic disruptions caused by the crisis in Ukraine, higher energy and food prices), and the possibility of new COVID-19 variants emerging on the scene are some of the lingering downside risks to the South African economy moving forward. If left unchecked, the country’s economic distress could be prolonged, even after ten years of pre-COVID-19 economic stagnation.
Yet South Africa is a significant exporter, with more than a quarter of its GDP coming from exports. The country exports quite a few valuable commodities. The list includes gems, precious metals, and gold (gold alone makes up for 15% of all the country’s exports) which can help boost the country’s GDP if the political landscape improves and the necessary reforms are made to enhance the country’s infrastructure needs.
Trading the South African Rand
The national currency of South Africa is the South African Rand. Up until the early 1970s, the rand traded at R1.5 per 1 U.S. dollar. However, the following decades saw the rand depreciate significantly against its counterpart. It cost more than R2.5 to exchange 1 U.S. dollar for the local currency, and by the year 2000, it took more than R6 to convert to 1 U.S. dollar.
After the September 11 attacks in 2001 created high global uncertainty, the South African rand took a deep dive down, falling to R13 per U.S. dollar. During the Great Recession of 2008, the rand was hit significantly and lost more than 35% against the U.S. dollar from 2008 to 2009. Investors flocked to safe-haven currencies such as the U.S. dollar and the Japanese Yen. During the pandemic, the rand weakened to R17 to 1 U.S. dollar and now trades at R15.6 per 1 USD as of April 2022.
The future for the South African rand is to be determined by several factors, ranging from the risk of a new coronavirus variant to global threats, such as interest rate movements in the U.S. and South Africa, the crisis in Ukraine, and more. Since South Africa is heavily reliant on commodity exports such as gold, iron ore and palladium, the movements in the prices of these commodities will have a significant effect on the rand.
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Forex Regulation in South Africa
According to most recent estimates, there are currently around 190,000 active traders based in South Africa. Although male traders primarily dominate the trading, Forex trading is becoming increasingly popular among women traders. The most popular trading platforms used in South Africa are MetaTrader, cTrader & ZuluTrade. You can read more about trading platforms on our site.
The financial system is currently regulated by three main regulatory bodies: South Africa’s Reserve Bank, FSCA (Financial Sector Conduct Authority) and South Africa’s PA, or Prudent Authority. The FSCA oversees financial service companies, such as Forex brokers, whereas South Africa’s PA monitors other finance-related entities except for banks. South Africa’s Reserve Bank completes the picture by making sure the region’s financial system remains stable, issuing the local currency, and managing the nation’s gold supply.
The Four Forex Market Trading Sessions
Determining the best time to trade forex in South Africa is crucial to your success as a trader. If you trade outside of the active hours, you will get fewer opportunities (less volatility, as the market tends to move much less than during the active hours). Also, you will suffer from increased spreads that will hurt your profitability. So, let’s see the answer to the question, “What time does the Forex market open in South Africa?”
The foreign exchange market is split into four main trading sessions: Sydney, Tokyo, New York, and London. Trading starts on Sunday at 9 pm GMT (the start of the Sydney session) and closes on Friday at 9 pm GMT (the end of the New York session). Below is a list of the Local, EST, UTC/GMT, and GMT+2 (South African Standard Time Zone) times for Forex trading and the four main sessions mentioned previously:
|GMT+2 (South Africa Standard Time)
As we can see, the Forex market opens at 11 pm South African Standard Time on Sunday and closes at 11 pm on Friday. Any time between these two periods is open for trading, while weekends are generally closed for trading.
The Best Time to Trade Forex in South Africa
Now that we have the opening and closing times of the four Forex trading sessions let’s see which of those sessions are most active and the best times to trade Forex in South Africa.
Luckily for South Africa, its time zone falls close to one of the most active sessions in the market – the London session. South African Standard Time zone of GMT+2 is just two hours ahead of London time. Generally, New York and London are two of the most active sessions in Forex trading, while Sydney and Tokyo take a back seat with less activity.
The most active time in the Forex market is the overlap between London and New York trading sessions. In South Africa Standard Time, that is between 2 pm and 6 pm – a pretty good time of the day that is easily within reach for those residing in South Africa. It is the time when more than 70% of all trades happen, with the most popular currencies traded being the U.S. dollar and the Euro. It is the optimal time to trade because volatility is high, bringing opportunity for profit, while the spreads are tight due to high liquidity, which increases profitability.
Other Times to Trade Forex in South Africa
The second significant overlap that still brings plenty of opportunities to trade is the London and Tokyo session crossover. It happens from 9 am to 11 am South African Standard Time, which is also a very good time to trade Forex. This overlap is not as volatile and active as the London/New York session overlap. Most U.S. traders are asleep at that time; however, it still offers plenty of opportunities, especially for those trading the EUR/JPY currency pair, which is the most affected during this overlap. You can learn more about currency pairs on our site.
Since the New York and London sessions bring about the most activity and volatility when trading forex in South Africa, the times outside these sessions tend to be much quieter. That is especially the case towards the end of the Tokyo and Sydney sessions, just before the start of the London session. It is hard to expect much volatility within this timeframe. It is, therefore, best to not make too many trades unless you are taking a position with the intent of taking advantage of a move during the start of the London session.
Despite the recent hardships of the South African economy, there are increasing numbers of middle-class trading enthusiasts looking to trade forex in South Africa and employ themselves and their capital in the foreign exchange market to make a better living. Luckily for South Africa, the country is located ideally to take advantage of the two most significant Forex session overlaps in the market, which brings about plenty of opportunities to earn profits.
Not only that but there are also plenty of reputable brokers that are currently offering reliable and inexpensive Forex trading and charting services to the South African population. The competition between the brokers makes spreads extremely tight which enhances profitability. Being in the perfect time zone to take advantage of peak market activity, South Africa opens the door for any trader to make their life better financially.
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